Best Assets to Pledge for Positional Options Selling 🤔

F&O
1

Hi :wave:t2:,

I trade positional option selling. I often deploy up to 90% margin.

I have pledged my assets in the following way.

47% - Equity Mutual Fund
33% - Debt Fund
20% - Cash

I only trade fully hedged neutral positional index options selling, to collect theta.

Since I know the max probable loss. I keep margin in my account around that value to prevent the margin call.

But now I think, what will happen if Nifty hits the lower circuit :thinking:? I haven’t experienced a circuit yet.

  1. When circuit hits, wouldn’t the value of the pledged asset go down decreasing the margin availability and triggering the margin call ?

  2. Since I hold only mutual funds which change once a day. Am I saved from the intraday margin fluctuation?

  3. Have anyone experienced a circuit while holding option selling position ? How will our trades behave then ?

I am thinking of modifying my pledge asset allocation the following way ?

20% - Equity Mutual Fund
35% - Debt Fund
35% - SGB
10% - Cash

  1. Should I allocate my assets to pledge differently ?
2 Likes
2

Afaik you are saved from the intraday margin fluctuation as you said that you hold only mutual funds which change once a day.

Still confirm from team once!

For the question 4, why not buy GSEC instead of Debt fund where you could get similar return with lowest risk(sovereign guaranty). You can pledge them too with only 10% haircut!

1 Like